In our view

Failure of lotteries board is also fault of Minister Davies - 25 Jan 2012 BUSINESS REPORT (Pretoria News)

By Shelagh Gastrow

Today’s planned march by non-profit organisations (NGOs) against the National Lotteries Board (NLB) shows the growing national anger over the way the board distributes our public funds.

The charities planning to march to the NLB’s offices in Pretoria are quite right to be furious over the epic failure of the board to fulfil its stated mandate to distribute funds to NGOs that make a difference to the lives of all South Africans, especially the most vulnerable.

The lack of accountability and transparency over the way the lottery operates and its random decision making, poor management and inefficient administration is devastating the essential work of many wonderful NGOs in the country.

However, one of the villains of the piece who seems to have escaped public scrutiny and rebuke is the minister of trade and industry and his department.

These people are ultimately responsible for making the policy that guides the allocation of the funds to beneficiaries. But this policy, in the form of the National Lotteries Act, is fatally flawed and unworkable, and only now, for the first time, is there any indication from the department that changes are to be made.

One of the key problems is that the distribution agencies that make the decisions about the lucky organisations that receive grants (and I use the word lucky, as it does seem to be just the luck of the draw), do not report directly to the NLB itself.

At the moment, they are only accountable to the minister who appoints them, whereas they should actually account directly to the chief executive of the lottery. And the appointment process to these agencies should be transparent and open to nomination from the public.

This would promote greater accountability. Civil society members who have an understanding of how NGOs are financed should also be represented on the NLB.

This would go a long way towards tackling the lack of transparency. Although an advisory committee has recently been established under the auspices of the board to engage with the distribution agencies, it remains to be seen if this will have any effect on their decisions.

As far back as 2009, Trade and Industry Minister Rob Davies admitted to Parliament that the distribution of funds from the national lottery was a cause for concern and was not “optimal”. He indicated then that his department would increase its oversight of the lotteries board to improve performance.

But nearly three years later, nothing has happened. In fact, the allocation of grants has become even more bizarre and questionable.

Take, for example, the outrageous R40 million contribution to the National Youth Development Agency, or the dubious R52m grant to Makhaya, an organisation based in Serbia that apparently promotes tourism to South Africa.

The minister also unashamedly defended the R1m grant to Cosatu, which just happens to own 10 percent of Gidani, the company that runs the lotteries.

At a Cape Town Press Club function last year, Davies publicly washed his hands of these decisions, insisting they were the domain of the NLB and that he could not get involved.

One of the biggest problems with the act is that it provides no purpose for the lottery funds other than to make grants for good causes.

Any grantmaker can tell you that if there is no purpose for a fund, there can be no logical criteria. The act established the fund but it doesn’t claim to reduce poverty, build communities or support civil society, and therefore has no real framework within which to do its work.

As a result, the administrative component of the lotteries only focuses on compliance. In other words, is all the paperwork there? The lotteries could potentially fund a pro-abortion organisation and at the same time, an anti-abortion organisation.

This lack of purpose helps to explain how some of the most controversial grant decisions could have been made: the paperwork was in order.

The purpose of our national lottery funds is left to the whim of the trade and industry minister and he can change that purpose with every new regulation. Current regulations indicate that 50 percent of grants must go to rural organisations.

According to a recent interview with lottery spokesman Sershan Naidoo, the money has to go to these deserving causes and not only to “big city organisations that know how to write proposals”.

While there is enormous value in funding rural initiatives, the likelihood of these projects being able to absorb and manage the amount of funds available is dubious, and it would be interesting to know if any research was done before this decision was made by the minister.

This patronising view of urban-based organisations shows how little the lotteries authorities understand about how organisations work. Many organisations have their headquarters in urban areas but deliver services in the rural areas.

Sadly, these services could now be adversely affected by this new regulation, promulgated not by the lotteries board but by the minister himself. So, while much of the current outrage is being directed at the NLB, let us not forget where the buck really stops.

Shelagh Gastrow is one of the founders of Inyathelo, The South African Institute for Advancement, which is dedicated to building a sustainable South African civil society.